Speculation rife as Packer ditches Echo 'insurance policy'

Date: May 24 2013

Sean Nicholls Matt O'Sullivan

James Packer's strategy for establishing a casino in Sydney is again the subject of intense speculation after the billionaire's company, Crown Limited, began selling its 10 per cent stake in rival gambling company Echo Entertainment.

The surprise sale, revealed late on Thursday, comes a week after Crown received regulatory approval to increase its stake in Echo, owner of the Star casino at Pyrmont, to 23 per cent.

Crown's stake in Echo, established early last year, has been seen as an ''insurance policy'' if the company failed to secure state government approval to build a $1 billion tower with a six-star hotel, luxury apartments and VIP casino at Barangaroo.

Mr Packer wants the government to grant him a second Sydney casino licence for the project after Echo's exclusive casino licence at the Star expires in November 2019.

But Echo has pitched a rival proposal to extend its exclusivity arrangement beyond 2019 and expand the Star.

A panel headed by former banker David Murray will advise the government which project it should back ''as soon as possible'' after the proposal deadline of June 21.

Crown's move to sell its stake in Echo has prompted speculation that Mr Packer is increasingly confident of his chances of success and has ditched his ''insurance policy'' strategy. It also comes amid an intense public campaign by Mr Packer aimed at securing state government approval of his proposed Barangaroo project.

Last week Crown unveiled the winner of an international design competition for a 60-storey tower proposed at the site. The company confirmed it would seek permission to build between 75 and 80 luxury apartments that would deliver it hundreds of millions of dollars.

Crown says it needs the apartments, along with a VIP casino over several floors, to make the project financially viable.

The proposed tower is about 250 metres tall, breaching existing height limits of 170 metres for a hotel on the site.

At the time Mr Packer declared that the proposed project, Crown Sydney, would ''be instantly recognisable around the world''.

The design finalists have polarised public opinion about what should be built at the site.

They were praised by former prime minister Paul Keating as ''heading in the direction of being a significant building for Sydney''. But they were criticised by the president of the NSW chapter of the Australian Institute of Architects, Joe Agius, as ''so unconscious of their context they may as well be in Dubai''.

The sale to institutional investors was priced at $3.20 a share, a 7 per cent discount to Echo's closing price of $3.44 on Thursday. It values Crown's stake at $264 million.